Coca Cola : Transcript Q1 2021

Corrected Transcript

19-Apr-2021

The Coca-Cola Co. (KO)

Q1 2021 Earnings Call

	Total Pages: 20
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The Coca-Cola Co. (KO)	Corrected Transcript
Q1 2021 Earnings Call	19-Apr-2021

CORPORATE PARTICIPANTS

Timothy K. Leveridge	John Murphy
Vice President Investor Relations, Financial Planning & Analysis, The	Chief Financial Officer & Executive Vice President, The Coca-Cola Co.
Coca-Cola Co.
James Quincey
Chairman & Chief Executive Officer, The Coca-Cola Co.

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OTHER PARTICIPANTS

Dara W. Mohsenian	Andrea Teixeira
Analyst, Morgan Stanley & Co. LLC	Analyst, JPMorgan Securities LLC
Bryan D. Spillane	Kaumil Gajrawala
Analyst, Bank of America-Merrill Lynch	Analyst, Credit Suisse Securities (USA) LLC
Nik Modi	Robert Ottenstein
Analyst, RBC Capital Markets LLC	Analyst, Evercore Group LLC
Lauren R. Lieberman	Kevin Grundy
Analyst, Barclays Capital, Inc.	Analyst, Jefferies LLC
Carlos Laboy	Sean R. King
Analyst, HSBC Securities (USA), Inc.	Analyst, UBS Securities LLC
Steve Powers	Laurent Grandet
Analyst, Deutsche Bank Securities, Inc.	Analyst, Guggenheim Securities LLC
Bonnie Herzog	William B. Chappell
Analyst, Goldman Sachs	Analyst, Truist Securities, Inc.

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The Coca-Cola Co. (KO)	Corrected Transcript
Q1 2021 Earnings Call	19-Apr-2021

MANAGEMENT DISCUSSION SECTION

Operator: At this time, I'd like to welcome everyone to The Coca-Cola Company's First Quarter Earnings Results Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be on listen-only mode until the formal question-and-answer portion of the call. I would like to remind everyone that the purpose of this conference is to talk with investors, and, therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations Department if they have any questions.

I would now like to introduce Mr. Tim Leveridge, Vice President of Investor Relations, Financial Planning and Analysis. Mr. Leveridge, you may now begin. Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delays in today's conference. Please hold and the conference will resume momentarily. Thank you for your patience.

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Timothy K. Leveridge

Vice President Investor Relations, Financial Planning & Analysis, The Coca-Cola Co.

Good morning and thank you for joining us today. I'm here with James Quincey, our Chairman and Chief Executive Officer; and John Murphy, our Chief Financial Officer.

Before we begin, please note that we posted schedules under the Financial Information tab in the Investor section of our company website at www.Coca-ColaCompany.com. These schedules reconcile certain non-GAAP financial measures, which may be referred to by our senior executives during this morning's discussion, to our results as reported under generally accepted accounting principles.

You can also find schedules in the same section of our website that provide an analysis of gross and operating margins. In addition, this conference call may contain forward-looking statements including statements concerning long-term earnings objectives and should be considered in conjunction with cautionary statements contained in our earnings release and in the company's most recent periodic SEC report.

Following prepared remarks this morning, we will turn the call over for your questions. Please limit yourself to one question. If you have more than one, please ask your most pressing question first and then reenter the queue.

Now, I will turn the call over to James.

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James Quincey

Chairman & Chief Executive Officer, The Coca-Cola Co.

Thanks, Tim, and good morning, everyone. In what remains a highly-dynamic environment, our first quarter results showed promising signs that a broader recovery is on the horizon. We're encouraged by early results in markets where mobility is on the rise.

This morning, I'll share what we're seeing around the world and provide an update on the actions we've taken to accelerate our transformation, including improvements in our portfolio, innovation, and marketing approaches enabled by the evolution of our culture and our network organization. Then, I'll hand over the call to John to discuss the financial details of the quarter and how we'll continue to deliver on our objectives over the course of the year.

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The Coca-Cola Co. (KO)	Corrected Transcript
Q1 2021 Earnings Call	19-Apr-2021

In the first quarter, we positioned our business for recovery while executing against our emerging stronger agenda, equipping our system to win. At the start of the year, pandemic-related lockdowns were still impacting many markets. We moved quickly as conditions changed, improving along the way and getting better at managing each wave and its resulting lockdowns. During quarter, we saw mobility increase in some parts of the world where lockdowns eased and vaccinations accelerated.

Leveraging our learnings, we drove sequential improvement in our business throughout the quarter and while we saw mid-single-digit volume declines through mid-February, trends have improved since then. We're pleased to say that March marked a return to volume levels seen in March 2019 prior to the pandemic.

We continue to see ongoing strength in at-home channels offset by away-from-home trends which have improved sequentially but remain pressured relative to pre-pandemic levels. We're working with our customers and bottling partners to sustain at-home momentum and capture improving away-from-home demand.

For example, in Latin America, our Prospera program with our bottlers helps the traditional trade thrive through assistance with their marketing efforts resulting in outperformance in this critical channel. In Great Britain, we launched Open a business accelerator program to support pubs, bars and cafes. In North America, our use of meal bundles is driving incidence of pickup and delivery transactions with foodservice customers.

In 2020, we gained underlying share in both at-home and away-from-home channels offset by negative channel mix. This continues to be the dynamic affecting our share year-to-date. Through our ongoing initiatives, and as away-from-home demand improves over the course of the year, we'll seek to build on these wins in 2021. There are clear opportunities to reaccelerate share positions as the recovery plays out and we'll invest to drive momentum with focus and flexibility.

In markets at the forefront of the recovery, we've seen early signs that our actions taken during the pandemic are helping us outpace recovery. It's important to note that the path to a full recovery remains asynchronous around the world. Many markets haven't yet turned the corner and are still managing through the restrictions.

Looking around the world, in Asia Pacific, China continues to lead the recovery with volume in the first quarter ahead of 2019 results and foot traffic almost back to pre-pandemic levels. Strong performance in India and Southwest Asia was driven by effective marketing across brands, affordable solutions, and distribution expansion with 250,000 new outlets and 45% more new callers despite the unexpected state of emergency earlier in the year. Japan expanded successful RGM initiatives geographically and across brands to help drive improvements later in the quarter.

In EMEA, vaccine rollout in Europe has been slower than anticipated and many countries have been impacted by ongoing lockdowns. In Eurasia and Middle East, brand Coke recruited 4.4 million consumers through affordability packages and a focus on at-home occasions. New marketing campaigns drove improvement in flavored sparkling soft drinks and FUZE tea reached an all-timehigh-value share in Turkey.

In Africa, mass vaccination is expected to take longer than the developed markets and despite ongoing volatility, Africa worked closely with our bottlers to deliver volume growth led by stepped-up execution through cooler placement and affordability packs like returnable glass bottles.

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The Coca-Cola Co. (KO)	Corrected Transcript
Q1 2021 Earnings Call	19-Apr-2021

In North America, the year is off to a good start. Ongoing strength in at-home channels was driven by core brands in our sparkling portfolio as well as Simply, fairlife and Gold Peak, all with encouraging results. Away-from-home began to improve in March as vaccinations and mobility picked up.

In Latin America, we leveraged our core brands, digital initiatives and refillable packages to recover ahead of the economy and our industry despite ongoing restrictions. While from away-from-home continues to be impacted by lockdowns, we're expanding the at-home consumption opportunity, leveraging consumer dynamics like indulgence and single-servemulti-packs.

Global Ventures continued to be impacted by lockdowns in the UK, but as restrictions loosen, we're focusing on driving digital engagement and traffic back to the Costa stores. Costa Express machines continued to deliver strong performance.

Turning to our transformation, our operating units are up and running and off to a very good start in the rollout of our new model. Across markets, our newly networked organization has us working more collaboratively with the overall enterprise in mind. Our operating unit and category leadership teams are working together to identify the most promising combinations across the industry based on economic outlook, consumer trends, channel dynamics, and execution imperatives. We're using more disciplined resource allocation to capture the biggest opportunities while making ongoing portfolio decisions faster and at scale.

We're focused on our streamlined growth portfolio, actively and thoughtfully transitioning brands to more powerful trademarks using a phased approach to bring the consumer with us on the journey, and we're maximizing shelf space for new product launches and higher velocity products to drive higher quality growth.

As we discussed at CAGNY, we're focusing on what we do best, marketing our loved brands in more efficient and effective ways. Our Sprite Let's Be Clear campaign kicked off in markets from Asia to Africa to Latin America. The message is resonating with consumers with impressions, views, and engagement levels above last year and intent to purchase metrics showing promising signs. This campaign aligns with our transition to a more sustainable clear bottle which is important in helping us achieve our World Without Waste goals.

Our media and creative agency reviews are progressing, and we're also executing more targeted opportunities in addition to the big strategic shifts. For instance, we've taken a scaled, digitized approach to buying trade materials, resulting in up to 15% cost reduction and improved user experience all while offering more consistent, better quality and sustainable alternatives. We've extended this pooled buying opportunity to our bottlers, many of whom are already onboard to share the benefits system-wide.

Our more disciplined innovation approach is yielding results as we balance big bets with intelligent experimentation. Using our networked approach, we are scaling our best innovations quickly and effectively while being disciplined with those that don't get the traction required for further investment.

Local experiments like Aquarius with functional benefits and Ayataka Cafe Matcha Latte in Japan, Fanta's exciting mystery flavor innovation in Europe, and package innovations like the 13.2-ounce recycled PET bottle in North America could all be lifted and shifted globally over time, similar to what we're doing this year with [ph] a hard (00:11:40) flavored sparkling water.

Our big bets for 2021 include ongoing work to scale our coffee platform under Costa. We're expanding ready-to- drink coffee in China and taking a portfolio approach to complement our powerful Georgia coffee brand in Japan. We're also rolling out an enhanced formula and package design for Coca-Cola Zero Sugar this month in Europe

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